ART04: Free Market Essentials

by Stewart Glass - 23 Dec 2006

what a free market needs to deliver the goods

I am a big believer in the free market as the best system for a prosperous society, however, I wouldn't consider the market as truly "free" without the following elements:

Justice - businesses and consumers free from physical intimidation, fraud or dishonesty

example: A retailer of fruit would be wary to set up competition against a long established supermarket if it knew there would be no protection from, or fair punishment against, death threats to them.

Equality - government to show no bias toward any entity

1. all entities free to enter a market

when an industry has a monopoly or inflated prices, it inevitably attracts competition, due to the good chance of profits. The greater the profits margin the greater the attraction. Thus, if free entry is allowed the market will (in time) automatically correct exorbitant prices. Look at what competition such as OptusPrimus and Dodo have done for telecommunication prices.

2. any entity free to leave a market

no company should be compelled to provide a service or to stay in an industry. Business should be free to choose what they sell, where they sell and when they sell.

3. no subsidization of industries by the government

subsidies are basically the government taking the peoples money and using it to prop up industries that are not economically viable or have been mismanaged. It is a form of economic inequality before the law and retards business adaptation and flexibility.

4. no taxation on a specific industry except for reparation for damages (see price linking)

this is the opposite of subsidisation - it punishes industries that are performing well.

5. no bailing out a company that goes bust

just as business should be able to reap the rewards of a success, so also they should take the risk of failure. Why should the peoples taxes be used to fund failure, when they had no part in the decision making?

6. no investing in industries to start them up

if a business has a chance for success and profit, investors will naturally be attracted.

Free Trade - the government not to inhibit buying, selling, deals and agreements between entities

government and bureaucratic involvement only slows down and adds unnecessary overhead expense. (Yes, all departments come with a price tag). Businesses have incentive to work by the most profitable and direct methods - let them be reward for their ingenuity. The law is there to make sure citizens are not involuntarily harmed in the process.